'This Week' Transcript: Economic Roundtable

Feb. 1, 2009

Page 7 of 10

SMITH: Well, I -- I think the -- the compensation structure on
Wall Street is basically built on -- on bonuses, much more so than in
the industrial sector. As I understand it, the average bonus in that
$18 billion is about $100,000 a year. The bonuses on Wall Street are
down about 44 percent.

So certainly up at the very top of the pyramid, people may be
getting more than the president of the United States. But I think you
have to go into the -- to the detail there.

Now, when you take government money, then obviously the Congress
has the right to put any kind of restrictions that it wants on -- on
the government money. I don't think anybody would -- would argue
that.

But it's a little bit, I think, an exaggeration to say that all
the money is going to -- you know, the top few people on Wall Street.
There are a lot of middle-level folks that -- that live on -- on those
bonuses. And the lack of those bonuses, probably the biggest people
are getting hit are the state treasuries of the state of New York and
the city of New York, so...

STEPHANOPOULOS: He brings in (inaudible) but to what extent have
CEOs brought this on -- brought this anger on themselves?

SCHMIDT: It's a judgment issue. And, you know, when you're
asking for the government, you need to moderate your behavior. I
think people understand that.

We're in this for the long term. And in the businesses that I'm
familiar with, people are primarily compensated with stocks. Stocks
are down. Stocks will eventually return. People will make money that
way. That's a much better way to compensate people.

STEPHANOPOULOS: And that's -- one of the things they're
considering, I hear, as the president tries to roll out this new
financial rescue plan, that the compensation should be in stock. And
also some talk -- although it's very difficult to do -- of trying to
get back some of these bonuses?

FRANK: Well, the clawback, yes. You -- you should have future
-- we put this into the bill that we passed last year. And the
problem is not just the amounts of money. And Fred Smith makes a good
point. Don't lump every bonus in together.

Now, maybe they would be better off with straight salaries rather
than bonuses, but it's true that some people at the working level,
bonuses there are different than bonuses at the -- at the top level.

And, you know, but here's the problem we have. We have this --
we're all familiar with the -- with the concept of collateral damage,
which is in the wars you don't want me to talk about, but where you
want to kill some bad guys and tragically some good people get hurt.

We have the reverse problem in trying to restore the credit
system. It's called collateral benefit. We need to restore the
credit system. Eric talked about this. The only way -- but you can't
create a whole new banking system de novo.

So the only way you can help the banking system get back into
credit is to do some things that will probably provide some collateral
benefit to people, people don't like. And what they shouldn't do is
make it worse for us.

DEMINT: But, look...

FRANK: There's one other point, though, I want to make, and that
is, it's not simply the dollars we're talking about. And this is,
again -- Fred made a good distinction between the non-financial and
financial parts -- the problem in the financial area in particular has
been a perverse incentive in the -- in the compensation structure.